Is Global Capitation a Better Way to Pay Primary Care Physicians?

Despite  the clamor about new ways of paying physicians, the reality is that most continue to be paid under a fee-for-service basis, and likely will be for some time.  Even under the ballyhooed “new models”, like Medicare’s Accountable Care Organizations  and Comprehensive Primary care Initiative (which is based on the Patient-Centered Medical Home concept), most physicians will continue to be paid principally on a fee per-visit and procedure basis.  In the case of ACOs, it is  fee-for-service plus/minus shared savings, and in the case of Comprehensive Primary Care Initiative, it’s fee-for-service plus monthly risk-adjusted care coordination payments for each patient seen by the practice, linked to measures of performance.

Might it not be better to drop fee-for-service altogether, and instead pay primary care physicians on a global capitation basis?  Under global capitation, primary care physicians would get a set amount of money each month for each of their patients, with the monthly amount per patient being adjusted upward or downward based on the relative complexity/risk of each patient in the physicians’ panel.

ACP members Drs. Allan Goroll and Bob Berenson, and two other co-authors, proposed such a fundamental change in how primary care physicians are paid, in an article published five years ago in the Journal of General internal Medicine.  They studiously avoided calling their proposal capitation, because “proposing a comprehensive, aggregate payment is likely to evoke memories of primary care capitation with its pejorative connotations; however, there are important differences, which lead us to avoid using the term ‘capitation’ to describe our system. The most important differences are risk/needs-adjustment, paying for performance to guard against underservice, and budgeting sufficient monies to support teams and infrastructures. These features are essential to avoiding the withholding of necessary care and the shunning of complex patients that too often occurred under the capitation initiatives of the past decade.”

From a payer’s perspective, the advantage of primary care capitation, or comprehensive aggregate primary care payment if you prefer, is that it makes spending much more predictable and controllable—the payer gives the primary care physician a set amount of money, and the physician is then responsible for keeping spending within that amount.  It also eliminates most of the cost to the payer of claims processing, billing, and utilization review systems and personnel, since the only “bill” that has to be processed is a monthly check to the physician, and with no health insurance claims being submitted, no claims to review.  Since the physician would have to live within the budget set by the monthly capitation payment, there would be no need to review the physicians’ utilization of tests, procedures and visits.

The idea of providing care within a monthly global budget, though, is precisely what many physicians fear.  They worry that the monthly payments won’t be adequate to cover their costs.  They worry that they will have to skimp on care in order to come out ahead.  They worry that even if the initial monthly payment is sufficient, payers would have an incentive to ratchet it down over time to save more money.  They worry that the payments won’t adequately adjust for the complexity and risk of the patients that they have in their practice.  They worry that the budget will put them at risk for things they can’t control, such as services provided by non-primary care physicians that the patient is also seeing.  They remember that under the primary care capitation schemes popular in the mid-90s, the best patients were the healthy ones who never needed much care and the worst were the sick ones who needed more services, because the physician was paid the same amount no matter how sick the patient was. 

Dr. Goroll and his co-authors recognize and try to allay these concerns, by differentiating their model from the discredited transfer of insurance risk on the back of doctors form of primary care capitations that physicians (rightly) object to.   They propose that the monthly payments “be directed to cover all practice expenses and salaries related to operating a robust, modern primary care practice, one that would qualify as an ‘advanced medical home’ for adults, a practice structure that enables efficient provision of comprehensive, coordinated, patient-centered care” so that “total practice revenue would markedly increase compared to that under RBRVS.”  

Also, “Payment for hospital and specialist services and ancillaries such as medications, laboratory tests, and imaging studies would remain the responsibility of payers and not the practice” and “a validated risk-adjustment framework that incorporates the full spectrum of important risk determinants, including those accounting for patient behaviors will be needed.”

Finally, the authors note that “in a cost-conscious society, it is unlikely that the new payment model will be adopted widely if it is viewed as a give-away to primary care physicians/practices. Conversely, primary care physicians are likely to reject the model if it appears to be yet another attempt to use them as gatekeepers or insurance companies. Our model tries to avoid both pitfalls by assigning most of the financial/actuarial risk to insurers while recognizing the responsibility of primary care practices to be financially and clinically accountable.”

I think it is time for primary care physicians to balance their legitimate reservations about anything that smells like capitation with an openness to consider the potentially big advantages, to them and their patients, of a model like that proposed by Dr. Goroll and his colleagues.  

The three things that I hear primary care physicians complain the most about is that they are under-paid, over-hassled, and overly-controlled by payers who feel compelled to second-guess everything that they do.  A Comprehensive Primary Care Monthly Global Capitation model, if it offers sufficient revenue in exchange for practice transformation with adequate risk adjustment, could result in primary care physicians getting paid more for their services, remove the hassle of having to submit bills and associated documentation requirements, and put the primary care physicians–not the payers!–in control of managing costs and quality within a budget—all while making health care spending more predictable and potentially, saving money for the system.  That sounds like a win-win to me. What about you?

Today’s question: What do you think about replacing fee-for-service and RBRVS with paying primary care physicians on a monthly, risk adjusted global payment basis, with the aggregate payments being “sufficient to cover all practice expenses and salaries related to operating a robust, modern primary care practice”?